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Maryland's Budget Structure

Executive Budget Development

Development of the budget is primarily an executive task. The
Governor formulates the budget and supplemental budgets. The Department of
Budget and Management (DBM) supervises the executive budget-making process.

The process starts about 15 months before the start of the budget
year. At this time DBM develops budget instructions for use by agencies in
preparing their budgets, and develops a maximum agency request ceiling for each
agency. The request ceiling limits the amounts of general funds an agency may
budget. The ceiling attempts to tailor the amount requested to the funds
available while providing some flexibility to the Governor. The ceiling may or
may not reflect amounts needed to:

Maintain current services;

Support operations of new facilities;

Implement enacted legislation; and

Annualize programs initiated in the current budget year.

Agencies that use special funds also receive a request ceiling from DBM.

Agencies are directed to submit budget requests to DBM on a
staggered basis throughout the fall of each year. Agencies may also request
additional funds for new or expanded programs "over the ceiling" or above the
amounts needed to maintain current services. Throughout the fall, DBM staff
review agency requests and "over the ceiling" items and make recommendations to
the Governor.

Final decisions on the budget are not typically made until the
new year. This is because the Board of Revenue Estimates does not report its
estimate of revenues to be available for expenditure in the budget year until
mid-December. In addition, the legislature's Spending Affordability Committee,
which advises the Governor as to its spending limit, reports in December.

The amount the Governor determines should be included in the
budget bill and budget books becomes the Governor's Allowance when the budget
bill is introduced.

Legislative Introduction

The budget, or Governor's Allowance, must be submitted by
the third Wednesday in January or by the 10th day of session if it is the first
year of a new term of office. The budget bill is introduced in both chambers,
and contains:

Appropriations for each agency by fund source for the next fiscal
year;

Deficiency appropriations (which provides additional funding for
expenses in the current fiscal year) by fund source;

Salary detail listing the grade, step, and salary for positions
in the flat rate and executive pay plans; and

Additional sections that pertain to the entire budget.

The Governor must submit a balanced budget to the
legislature in January of each year for consideration. The budget may be
balanced assuming proposed revenue that currently is not being collected by the
State.

Legislative Consideration and Action on the Budget

The amounts in the Governor's Allowance may be altered by
legislative action to reduce or restrict particular appropriations. The
legislature may not add to the budget or move money from one program to
another. After introduction of the budget but before final action on the
budget, the Governor, through introduction of a supplemental budget may reduce
or increase the budget.

Supplemental budgets permit the Governor to correct errors or
omissions in the original budget and are used to appropriate new spending (i.e.
either re-appropriating funds deleted by the General Assembly or appropriating
new revenues based on revisions by the Board of Revenue Estimates). Although
customarily accepted, supplemental budgets may only be attached to the budget
by consent of the legislature.

While the legislature can not add to the budgets of the executive
branch, it can add to the legislative and judicial budgets.

Funds cannot be redirected to other purposes by the legislature.
Appropriations for debt service, statutorily mandated support for public
schools, and salaries in effect for constitutional officers may not be reduced.
Mandated funding for any program can be reduced, although funding related to primary/secondary
education programs required by statute can only be reduced in conjunction with
changes to statutory programs via separate legislation.

For each legislative session, the House and Senate alternate which chamber will move the bill.

Legislative procedures include:

Subcommittee hearings.

Subcommittee decision meetings to adopt actions.

Subcommittee reports to the full committee.

Full committee decisions.

Floor debate.

Passage and consideration by the second chamber.

Conference committee.

After passage of the conference committee report by both chambers
the budget is enacted and does not require the Governor's signature. Passage
in April allows access to deficiency appropriations in the current fiscal year.

The budget must be enacted by the 83rd day of session. If this
does not occur, the Governor issues a proclamation calling for an extended
session should the budget not be enacted by the 90th day.

The Governor may not veto the operating budget or line items
within it.

In addition to budget action, the legislature may increase State
spending through a supplementary appropriation bill. Under this
legislation, the legislature raises a tax and directs its revenues to a
particular purpose. Supplementary appropriations may only be considered after
enactment of the budget bill, and are subject to veto. Bond bills, for
example, are considered supplementary appropriation bills.

The budget has the force of law for only one year, while it is in
effect during the fiscal year that runs from July 1 to June 30 each year.

If revenues are needed to pass a balanced budget, the Governor or
the legislature may consider a reconciliation act. The reconciliation act is
not subject to the same rules as a budget bill and typically is considered at
the same time the budget is considered. They have become a fixture in recent
years as the State continues to face budgetary challenges.

Budget Implementation

Final legislative action establishes the legislative
appropriation for each budget program. For practical purposes this
refers to the amount of funding as of the first day of the fiscal year, or July
1 in Maryland.

The Governor may alter appropriations in the course of the fiscal
year by budget amendment. Once amended during the fiscal year,
the legislative appropriation becomes the working appropriation.
The following general rules apply:

Funds may not be transferred from one agency to another unless
specifically authorized by law or general funds are transferred from the Contingent
Fund in the Board of Public Works.

The total amount of general fund appropriations in the budget may not be increased.

Special, federal, and higher education fund appropriations may be increased, subject to
legislative review if the revenues are available. Amendments over $100,000 are
subject to legislative review.

The Board of Public Works at the request of the executive branch
may create positions during the course of a fiscal year. Budget bill language
typically limits this authority to the addition of 100 State-funded positions.
There is currently no limit on the number of non-State funded positions.

The Governor may reduce an agency's appropriation during the fiscal year by up to
25% through BPW, to address shortfalls in revenue. As interpreted by the
Attorney General, the 25% reduction applies at the agency level (so entire programs
within an agency can be cut by more than 25%) and applies to the total
appropriation at each point in time in case of multiple rounds of reductions. The
Governor may not reduce funding through the BPW for debt service, the
Legislative or Judicial branches; K-12 education (including the Schools for the
Deaf and Blind), and salaries in effect for constitutional officers.

Non-budgeted agencies such as the Maryland Transportation
Authority or the Maryland Environmental Service do not have appropriations.
They are self-funded and depend on their own revenue for agency operations.
The Governor submits information on the annual budgets of non-budgeted agencies
and DLS prepares an analysis of non-budgeted agencies for informational
purposes only.

Budget Closeout

Closeout is the
process of closing the books on a fiscal year (July 1 to June 30). In this
process appropriations are booked as:

Expended (obligation incurred and payment made).

Encumbered (obligation incurred but payment not made).

Reverted (unexpended and unencumbered general funds) or canceled (unexpended and
unencumbered general funds).